Gold may decline to $1,030 an ounce in the next few weeks as sovereign debt problems in Europe prompt investors to favor the dollar as an asset of “first resort,” GFMS Analytics Ltd. said. The U.S. currency “has another period of strength left in it,” Rhona O’Connell, managing director of the London based research company, wrote in a report posted on its Web Site. Debt encumbered Greece and a faster recovery in the U.S. economy than in Europe “point to renewed dollar strength,” she wrote.
Gold prices have stalled this year after a 24 percent jump in 2009 as Greece’s budget crisis shook confidence in Europe, pushing the dollar higher. The Dollar Index, a gauge of the U.S. currency’s value against six major counterparts, has advanced 3.5 percent this year. Gold for immediate delivery rose 0.3 percent to $1,105.10 an ounce at 12:05 p.m. Singapore time. The metal dipped to $1,092.47 an ounce yesterday, the lowest price since Feb. 25.
Still, investment demand for the precious metal will revive as loss of confidence in the economic recovery is expected to rekindle interest in gold later this year, especially if a double-dip recession develops, said O’Connell, who has more than 20 years’ experience as a metals market analyst. Government spending after the worst global recession since World War II spurred demand for gold last year as a hedge against inflation and a declining dollar.
Silver may also underperform as strong industrial demand may turn out to be stock building, while the platinum market will see another surplus this year, she said. Palladium’s fundamentals are stronger, “with a deficit again developing in the coming months” and a “positive price profile forecast” for late 2010 and into 2011, the report said, without giving a specific price estimate.
You can contact reporter Kyoungwha Kim at Kkim19@bloomberg.net
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